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Cyber Monday is all about shopping online, which means that internet savvy patrons will have an opportunity to seize the day to take advantage of the growing trend to browse holiday specials using a computer, cell phone, or hand-held device.
It appears that Cyber Monday could break a record as Black Friday numbers were disappointing this year, according to ShopperTrak retail sales on Friday fell to $10.4 billion, down from $11.6 billion in 2014.
Of course Black Friday is just another day, just as Cyber Monday, so the most important scorecard will be the combined holiday sales – the combined efforts of bricks and clicks.
We all know that there are Retail REITs that own Malls and Shopping Centers are differentiated by the various tenants within their portfolios. Much of the success of the REIT is based upon the success of the retail tenant.
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It stands to reason that a REIT with significant exposure to Sears and JC Penney would be riskier than a REIT that leases to Rich’s and Saks. Likewise, a Shopping Center REIT that leases space to Barnes & Noble is risker than a REIT that leases to Publix or Kroger.
It’s becoming increasingly clear that the companies with the most powerful forms of differentiation will be the best stocks to own. It’s my job as an analyst to seek out the most powerful models of repeatability that are capable of sustaining differentiation over time and through constant change.
While I believe there are certain retail REITs that will survive the internet revolution, there appears to be less focus on how to invest in the most disruptive forms of repeatability – the world of clicks. As a result, I wanted to provide you with my list of Cyber Monday REIT picks.
My Cyber Monday REIT Picks
Digital Realty (DLR) is a data center REIT with a market cap of around $10.5 billion. The San Francisco-based company is a leading data center landlord that leases space out to many well-known digital juggernauts such as Facebook (FB), Yahoo! (YHOO), and IBM. One of the best indicators of DLR’s successful forms of differentiation is the 10 year dividend history – the company has raised and increased annual dividends since going public in 2004. DLR is trading at sound value today (no bargain) with a P/FFO multiple of 14x and a dividend yield of 4.7%.
Another data center REIT that I recommend researching is CyrusOne (CONE). The company was previously the co-location unit of Ohio-based Cincinnati Bell Inc. (NYSE:CBB), and on January 17, 2013, the $2.4 billion (market cap) REIT spun off its data center portfolio by listing around 16.5 million shares on Nasdaq, raising around $313.5 million (around $19 per share).
Cincinnati Bell is the last of the "Bell Companies," and the 140-year old phone company recognized that the data centers were throwing off a lot of cash. By spinning off CyrusOne, Cincy-Bell seized the opportunity to de-lever and help develop a standalone brand.
Like DLR, CONE is trading at sound value with a P/FFO multiple of 16.9 and a dividend yield of 3.5%.
Moving over to another “Cyber Monday” pick is Crown Castle International (CCI). I recently began to research this cell tower landlord and I was attracted to this company since it does not have the riskier global mix as compared with its peer, American Tower (AMT). Recently CCI elected to raise its dividend significantly and the company is currently paying $3.28 per share which is 75% of AFFO (compared with AMT, CCI pays out substantially more of its AFFO and that's why you see a higher dividend yield: CCI’s yield is 4.1% and AMT’s yield is 2%.
One final “Cyber Monday” pick is Corporate Office Properties (OFC). Given the growing forces behind cyber threats the demand for global security is at an all-time high. According to infographic, 1,993,201 records are lost or stolen every day, 83,050 every hour, 1384 every minute and 23 every second. Around 66 percent of breaches have occurred in North America.
OFC is the only REIT that is specifically focused on serving U.S. Government agencies and defense contractors engaged in defense information technology and national security-related activities. This is a very strategic niche, and one in which OFC’s tenants are generally focused on knowledge-based activities, such as cyber security, R&D and other highly technical defense and security areas.
Accordingly, OFC has a strategic tenant niche that provides real estate solutions serving a specialized cyber-based platform. The defense installations (or government demand drivers) where OFC's tenants operate are R&D, high-tech knowledge-based centers, NOT weapons or troops-related.
OFC shares are trading at a discount, with a P/FFO multiple of 11.2x and a dividend yield of 4.9%.
In summary, these “Cyber Monday” REITs provide an alternative for investors to take advantage of the growing demand in cyber-based real estate solutions. For more information visit my website HERE.
The author owns shares in DLR.
Brad Thomas is the Editor of the Forbes Real Estate Investor and writes for Forbes.com and Seeking Alpha. He is also a frequent guest on Fox Business and he is currently writing a book, The Trump Factor, about U.S. presidential candidate Donald J. Trump. Given the author’s in depth analysis of Trump, this book is certain to be a “game changer”.
